San Diego economic indicators up again

Unemployment rate expected to stay high

Despite public skepticism over the strength of the economy, San Diego County’s leading economic indicators continue to suggest that the long-troubled employment and housing markets are on the mend and that a recovery is in the offing, according to a report released yesterday by the University of San Diego.

Economist Alan Gin, who compiles the index for USD’s Burnham-Moores Center for Real Estate, said the numbers indicate that the decline in local economic activity has either bottomed out or will probably bottom out by June. But he warned that the jobless rate, which has been in the double digits since last June, is likely to stay high even after the economy sputters back to life.

“Employment is typically a lagging indicator, as firms usually wait until they are sure that a recovery has taken hold before they make the big commitment to add permanent staff,” Gin said. “The situation will probably be more difficult in this recovery, because many firms took steps to be much more efficient and are unlikely to hire back as many employees as they let go during the downturn.”

The USD index has been rising steadily for the past 10 months and now stands at 107.9 points, up from an all-time low of 100.7 in March. Its all-time high was 144.2 in March 2006, when the real estate market was peaking.

Gin’s conclusions were echoed by a Southern California index of leading economic indicators released yesterday by California State University Fullerton. Like the USD index, the Fullerton index has been rising steadily since last spring.

Fullerton economist Adrian Fleissig, who compiles the index, said it suggests that Southern California will begin to have positive economic growth in the next three to six months, “although it may be a jobless recovery.”

Fleissig cautions that even though the economy is showing signs of recovery, he does not forecast much growth in Southern California this year or next, partly because of the continuing economic sluggishness in San Bernardino and Riverside counties.

“Although some parts of the region are doing better than others, for the region as a whole it’s going to be a long and slow recovery that will probably continue to lag the U.S. economy,” he said.

Five out of the six standards that USD uses to evaluate the economy improved in January:

Home construction. After the two worst years for home building in San Diego County since the Great Depression, construction has been inching up in recent months. In January, the county issued 282 permits for residential units.

That’s very low by historical standards, but it’s more than three times the volume of the year before, when 87 units were authorized. That was the first time since record-keeping began in the late 1970s that the county OK’d fewer than 100 units during a month.

Unemployment. Initial claims for unemployment insurance dropped during the month, which Gin describes as “very positive news.” January is usually one of the worst months of the year for employment because retailers lay off their seasonal staff after the holidays.